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RodinStar / Startup

How I Doomed my 1st venture?

 

 

Awarded the

“Rodinstar” Post 

of the week!!

 

I used to run coaching classes on contract-basis few years back, It was a moderate cash cow for but not my own venture as it didn’t bear my name though I was the one who was running it, recruiting teaching staff, paying them, etc. But class was owned by some other guy whom I used to give share of revenue.

In 2010, unfortunately I got less students, the amount of fees collected was less than I had to pay to my teaching staff. But I had a buffer of 6 months as I used to pay only after completion of syllabus.

(Now comes the mistakes that I did to doom my 1st venture)

1. Always take calculated risk not just based on vague assumptions & Never take out cash from cash starved business to fund another business

I had an idea of starting a food outlet in my mind since long, so I thought why not use this money to fund my idea and make profit and pay back my staff 6 months later.

But the money was not enough to start with, so I went on selling my idea to my friends for investment and finally convinced two friends Rohan and Sayali to invest 50k and 100k respectively. But all that they gave me at that point of time was promise to invest that amount, nothing was in my hand or on paper.

2. In food business location dictates what is to be served

I started searching for location and the criteria was there should be colleges around and low rentals, I found such a place but in Badlapur (20km from Kalyan). Badlapur was developing fast, many new constructions were coming up but market was yet to be developed. I got a place, Bharat college and Mahatre college in vicinity, so I thought it was an ideal location as more than 3000 students were studying in these colleges.

Next I started  searching for a chef, I used to stand outside hotels and approach their cooks and tell them that I have a vacancy. Finally with this practice I met Ganesh Patil who was going to be my chef for next 14 months. He was then serving as Head Chef in Smokin Joe’s and had an experience of 10 yrs. Now he was a pizza expert and no one served pizza in Badlapur, so it was an ideal choice for me. I immediately started working on that direction of starting a pizza outlet but didn’t think for a second ‘Why there weren’t any pizza outlets in Badlapur?’ It often happens that we want to capture a virgin market and when we get such a place we want ourselves to believe that it’s a virgin market just because no one thought of that idea.

Actually, people in Badlapur are conservative when it comes to spending and with limited exposure. Many a times my customers used to ask me how to eat pizza? So pizza was not an ideal choice.

Ideal choice would have been to start with something which start at Rs. 10. Even Vada-Pav with some USP would have worked. So when you find a market with no competition don’t rejoice – first probe why there are no competitors. And for food business, location always dictates what is to be served.

3. First get all the money on table from paper then start spending.

Rohan as per promise gave me 50k but Sayali had some HUF problems, so she told me start using the money I had with me and she would pay me few weeks later. I believed her and spent all the money in procuring equipment, raw materials, rent, deposit, etc. Sayali kept on postponing but I somehow managed to match all the expenditure and the amount I had with me and launched ‘Chaska Pizza Outlet’ but I had literally zero balance in my account the day I started. I had no money even to pay the expenditure for a month on the first day. Later, of course Sayali didn’t invest single penny and I was partly doomed, as I had no contingency fund, fund for marketing, etc.

4. If you don’t have deep pockets then start small

I had picture of Pizza Hut and Dominos while starting my pizza outlet but didn’t have deep pockets like them which I ignored. I went on to recruit 4 people, giving them good salaries so that they won’t leave, then I rented a 1000 sq.ft space instead of a kiosk which added the burden of high rentals. I went on to procure equipment with more capacities than I’d require initially, anticipating the whole Badlapur would be waiting outside my outlet for pizzas. I procured more no. of chairs and tables than required hoping all 3000 students of nearby colleges spending their free time at my outlet spending extravagantly.

5. Only take inputs from experienced people but while executing use your own brain

As my chef had 10 years of experience I’d often take inputs from him and used to end up taking orders from him. He told him he would need 300 sq.ft space just for kitchen, so I had to rent a big space 1000 sq.ft.

He told me he would need an assistant who must have good experience in hotel industry while truth is even a fresher would have done that job, so I ended up hiring his friend.

He gave me list of equipment he’d need and without trying to find alternative I bought them.

He gave me a list of distributors to procure raw materials from, and I ended up procuring best of the raw materials available in the market, just imagine distributor of Dominos and mine were same. 

I tried to convince him to lower down the quality a bit according to the crowd and we will be able to lower down our prices too because people in Badlapur were more concerned about quantity and money spent than quality. Many a times customer would suggest lower down the price we don’t mind you lowering the quality a bit. No matter how much I’d tell my chef to lower down quality, he always did the same. I wish I’d have used my brains very 1st day.

6. Keep operating cost as low as possible

As my chef was highly experienced, I was paying him Rs.10000, which is equivalent to what good pizza brands pay, I was paying his assistant Rs.6000, and I also had two delivery boys.

No one used to bring tiffin, chef used to cook lunch for everyone there itself using a commercial cylinder which was costing me Rs.1200, and I had to bear the cost of all the food that was cooked and everyone partied.

Due to these things our operating cost went as high as 50k per month and remember I said I didn’t had a penny on day 1. So the total sale of Pizzas in 1st month was 45k, lower than operating cost. so I made a good loss in 1st month itself.

10 months later I brought down operating cost drastically to 15k per month, that was a good trick how I did that.

But the point here is, what if I’d have adopted this strategy in 1st month itself having a operating cost of just 15k in 1st month. Sales was 45k in 1st month, so I could have made profit in the 1st month itself and invested the surplus amount in marketing and would have entered a different phase.

So it was a great mistake of having a high operating cost which absorbed all my money, so I couldn’t do marketing, no marketing so no awareness in public, no sales, so we entered into vicious circle.

Finally 14 months later I had to close down my venture and when I look back it was only and only my mistakes, though I gained lot of experience, turned mature from being amateur.

Of course I couldn’t pay my teaching staff too, so I had to take more loan to pay them. But then this incident taught me how to take charge, what are the details to be taken care of, how to manage finance, how to deal with customer and how to have realistic assumptions.

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53 Comments

  1. aman… i’m thinking of starting a ‘celebrating failure’ section on trhs. 

    thanks for sharing your story. i hope our young rodinhooders can learn something valuable from your experience.

  2. Its a great Idea. Success requires just one more attempt than failure. Once entrepreneur learns to celebrate his failure, his success is inevitable!

    We hv lot of failure stories to share, so eagerly waiting for ‘Celebrating Failure’ section to start.

  3. Hi Aman,

    Thank you for the wonderful insights. I used the word wonderful for something related to failure because I know you would scale great heights now.  I am starting something is hospitality soon, and these would serve as ready-guidelines for me. 

    For me the biggest learning point here is Location!
    Believe me, I and my partner are breaking our heads daily because of this because this is one factor that would make or break food business. Even I believe, virgin location does not necessarily guarantee success.

    For me, success in food business will come, only when the person who is starting up knows what his customers actually want to eat? (for example- college going students won’t spend much on pizza, owing to pocket money issues, they would have preferred rolls or may be even a Noodles outlet!)

    Anyways, I would take a lot of points from your story. I wish you all the best for your future venture. Success be all yours! 🙂

    Regards,
    Tejas Nimbargi
    08297057571

  4. Hi Aman,

    Thank you for sharing this! I have too ventured into food business a year back and could relate to most of the points. 

    Asha,

    Can you please share some links to post that shared their failure story in food industry? 

    It would be of great help for entrepreneurs like me, Aman, Karan Pandhi, Tejas who have ventured or planning to venture into food industry. 

    Thank you in advance. 

    Regards,

    Divyesh Panchal. 

    9619 32 33 34

  5. Happy to know that the post was of some help to you.

    Regards,

    Aman Jha

    9892621090

  6. Hi Tejas,

    Thanks for the compliments. When I started, I started abruptly and was amateur, still I believe the decision to ‘START’ was the right one. I ahve helped setup two restaurant after my 14 month stint and they are doing good.

    If you need any assistance in terms of distributor, suppliers, equipment, etc, feel free to contact me. I’d be happy to assist you.

    Regards,

    Aman Jha

    9892621090

  7. Thanks Aman. We are right now brainstorming on the location point. Additionally, meeting up few people to understand the dynamics of this industry. I and my partner, both are from Mumbai, but right now I am working in Hyderabad. Serving my notice period. 🙂

    yes, we should definitely meet up. Assistance would be great for us, you being an experienced guy. Also it is always great to meet like-minded people! 🙂

    Have a nice evening. 🙂

  8. well said

  9. for clijmbing mountains,u shud gain momentum from big falls…………….but be ready to cling on when u reach up.:-)

  10. Hey,

    Happy to see u on Rodinhoods!

    Thanks for the above quote!

  11. Asha …trhs is doing an amazing job by showing us the light of the day and the night of the dark!’celebrating failure’ is always important…waiting for that section to start and startle us  🙂

    Aman…It is not easy to look upon your mistakes and learn from them….i think the rodinhoods has given us immense possibility to share and discuss..a helpful post!

  12. divyesh…

    i will search for sure. but you know what would help?

    post this question in ASK – we might get more insights….

  13. chinmay… keep giving us feedback! it motivates the entire community 🙂

    and stay tuned…!

  14. Chinamy u r right! Rodinhoods is a family of entrepreneurs, everyone doing their own business but ready to assist felllow members. trhs has become sea of practical knowledge.

  15. Hi Aman, 

    You know what, I kind of doomed my food venture in a similar way… All those points were so apt, I also hired a bakery guy with a lot of experience and kept fulfilling all his wants, without even thinking, of my own running costs. My venture was named “Dial a Cake” , I had to shut it off after about 2 years, cos, running costs were getting higher than the margins. 

    Anyway, it did give me a lot of experience and I know now for sure, I’ll not make the same mistakes. 

    Thanks for sharing your story and making me believe, that I am not the only one 🙂

    Kamal 

    9717170245

  16. kamal… 

    pls feel free to share your story as well. when you have time of course. there are a lot of youngsters on this thread who need to learn from other’s experiences…

  17. First of all a Grand Salute to you for learning so much from failure and reducing the expenses so drastically…

    Thanks for sharing..Keep working hard

  18. Hi Kamal,

    I’d love to read your version of doom story. And ofcourse we are not the only one’s who do such mistakes.

    Now many people come to me for suggestions regarding food joint biz, but no matter how much I tell them they often commit same mistakes but then they are smart enough to understand that my advice was worth and they immediately make corrections.

    Regards,

    Aman Jha

    9892621090

  19. Hi Ashish,

    Thanks for the comment.

    Regards,

    Aman Jha

  20. You know what I found the toughest struggle in your journey was waiting outside the restaurants to find the right recruit for the job of chef.

  21. Bingo! You got it right. For any not-so-big brand food joint, finding the chef who fits the bill is the most difficult & crucial task!

  22. Aman.. thanks for going into such details and actually giving us an overview of your story… it helps a lot.. no matter in what business each one of us is.. The key points are helpful in all scenario. Particularly – “Never take out cash from cash starved business to fund another business” is a great lesson learnt.. We entrepreneurs are often beaming up with new ideas everyday and the sheer passion make us forget about finances but instead focus on the “IDEA”. This point of yours has cautioned me a bit. 

    Thanks..

    TO TRHS: This place brings you answers to your questions all at the right time.. All you need to do is keep sharing (for others) and keep reading (for yourself!).

  23. GRATE ARTICLE 🙂 i am also thing of entering in food business ur insight was really nice . 

     

  24. my gosh anamika… 

    “All you need to do is keep sharing (for others) and keep reading (for yourself!).” is such a goosebumpy thought. even you need to start tumbling your wonderful thoughts!

  25. Thanks Asha.. Let me try tumbling them 🙂 

  26. Hi Anamika,

    You are right, Entrepreneurs are always beaming with new ideas and temptation is very strong to start it immediately with whatever is left with us, but this can kill both the business, existing one as well as new one!

    Regards,

    Aman Jha

  27. Hi Srinivasan,

    Thanks for the compliment and all the best for your venture. Feel free to contact me if you require any assistance.

    Regards,

    Aman Jha

    9892621090

  28. After reading this post few people including my family members asked me how can u post this on internet, it seems u r proud of it, u hv wasted so much money and time and still proud of it????????

    Let me ans it here,

    Yes, m proud of it, because I had the courage to start, then to close down, shrug it off and start again something new.

    Y failure is taboo in India? Failures are the bricks of Success!

    Regards to the world,

    Aman Jha

    Entrepreneur & Rodinhooder!

  29. Hi Aman, 

    This is a good story with lessons for aspiring entrepreneurs. 

    I have a different view on the the point where you mentioned that you will use funds from the first venture to invest in second venture, which will generate profits after 6 months and help pay-off salaries for teaching staff. I think that was a bad idea. Instead you should have waited for the first venture to become self-sustaining to take care of its own expenses with good buffer cash flows (surplus). After it attains strong positive cash flows you could have started the second venture (foods) which is uncertain and new to start with. 

    I think the idea of making money in another venture to repay your staff was not a good decision. Instead you could have invested in a safe deposit to earn decent interest. 

    The idea of starting 2nd venture was not bad but linking it to the first one was a bad idea in my personal view. However, everyone including me makes mistakes and we learn. Assuming your coaching venture is profitable and self-sustaining by now, requiring little attention/botheration from you, then starting up the second venture with a fresh plan would be a good idea. 

  30. Hi Sridhar,

    You are right, thats y I shared that point as one of the reason why food joint venture failed. Actually there was a temptation to have something of my own, classes was not mine just on contract basis.

    Though all decisions turned to be wrong, this venture helped me a lot to grow, I hv got a jump in a career due to this failed venture, ‘HOW’ we will discuss sometimes later.

    As this was a post of celebrating failure, I mentioned only about failure. There were lot of success points too.

    Now m running a new biz and classes after clearing all the dues, I hv handed over the it to another friend, now he is running it on contract basis as I am busy with my other venture!

  31. Hi Aman,

    Great to see so many people learning from your posts.
    Also my partner told me, it was a great interaction with you. Thank you so much for your time.

    Looking forward to many such worthy interactions and collaborations.

    Cheers,
    Tejas

  32. I agree with you that entrepreneurship will have its ups and downs including several financial risks that are inevitable. Congratulations to you for coming out with success despite the challenges.

    Which venture are you in to currently? Just curious to know

    Wish you all the best for the new venture.

  33. Hi Tejas,

    I understood what exactly you guys are planning to do. After I thought a while over your plans, I hv some suggestion which may click and fit into ur plan, would like to discuss with you when you or Bauhtik hv tym.

    Regards,

    Aman Jha

  34. I have launched Start4Startups (S4S). Here we set up business for entrepreneurs.

    If you have an idea, you can come to us, we will do the implementation while you can concentrate on theme. We never give advice to clients until asked, we just do execution part as per their strategy, in short our clients outsource their troubles to us and we take it happily. We have a team of experienced people working in MNCs who can also plan, design strategies, promotions, etc as per client’s idea. We offer few more services along with this.

    Currently we are developing E-commerce and direct selling concept business for a client and and by MAY we will be working with four more clients.

    I would love to have feedback from you about my business concept.

    Regards,

    Aman Jha

    9892621090

  35. Thanks Aman, You can contact Bhautik anytime. He can come to Dombivli anytime. And if it is manageable over call, I will call you.

    Thanks for all your help mate. 🙂

    Cheers,

    Tejas

  36. Surely, will contact him when get some time!

  37. dear aman… pls check the top of your post!

  38. I checked it just now and it was big surprise!

    Thank you very very much! And a big thanks to everyone who liked it, shared it, gave me suggestions, opinions, etc.

    I always used to tell people Failure is rewarding, now I can show them this post and proudly say my failure won me this honor!

  39. sahi,hai,just keep improving as a businessman and as a person,u’ll do the best in everything,just keep faith in urself.

    internet buisness solutions is a big sea,u’ll get plenty of fishes in it.

  40. Change the title. It should be- My First Stepping Stone towards success..

  41. Yep, it suits!

  42. divyesh… aman just posted another post really worth reading. 

    http://therodinhoods.com/forum/topics/how-to-set-up-low-cost-food-joint

  43. Read it first thing in the morning and immensely enjoyed. 

    Thanks Asha and Aman! 

  44. Hey Aman

    Its really a great article. I wanted to come to Chaska but sorry never came there. But I have herd positive reply form people visited there.

    Cheers. 

  45. Dont worry dude, hv closed down one outlet but building few more for others through S4S, once its done, you can visit, will let u know!

    Regards

  46. Great post. Specially the part about having money on the table first! Very insightful. How many of us would count on money promises while taking the plunge. Though in reality, people back down faster than you can say the word!

  47. Hi Parul,

    Sorry for late reply, somehow I missed ur comment. Actually Entrepreneurs get so indulged with the idea of startunp up that they forget to make a rational check on the scenario. Of Course people can back down, so nxt step is again convince them, its an ongoing process. Coz putting in money in others biz is a difficult decision and often frnds n relatives consult 1000 people aftr committing the investment and they back out aftr they get negative reviews but then an Entrepreneurs job is to again influence them to invest, blow positive energy into them. The trick is to find out the soft spot of frnd n relatives and hit it. In my case, the frnd who invested was interested in food business and always wanted to run a food biz, that was the soft spot, he backed out many times, but everytime using that soft spot I brought him back.

    Regards.

  48. Kudos for putting forth such an experience in your business so boldly, very well written, Aman. 😀
    This is what happens when you start a business without proper training or experience about a business.This is a lesson for freshers how money is to be managed not to fall in to believing whatever the person hired by you says.As a business owner,you should be in charge of finance, staff, mainly. These things you can never learn in business schools.

    Good luck Aman.

  49. Hey aman . ! i can quite relate with you , i am running my training center for engineers in ahmedabad and i wanted to explore virgin market of Himmatnagar which is 100KM from AHhmedabad , luckily in process i met one of my friend who had recently closed down his training center in himatnagar and then explained me why .The reason were quite same that you mentioned and One more thing i wanted to know more about how you managed lower down your monthly expenditure ton 15k ?

  50. This is a masterpiece !

    Thanks for sharing your experience Aman

  51. Thanks for your kind words!

  52. well said…awsum..lessons learnt

  53. Hey Aman,

    Very insightful. I’m planning to open a food outlet in Pune and this will really help me to plan for stretching long with less budget. 

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